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The US has launched an attack on crypto-exchanges

Two of the biggest crypto exchanges have been accused of get-rich-quick scams
(photo: CC0 Public Domain)

Over the past two days, the US Securities and Exchange Commission has filed lawsuits against the largest crypto-exchanges in the world – Binance and Coinbase. The US regulator claims that Binance and its founder were involved in fraud to increase profits.

Against Binance Holdings Ltd., its US subsidiary BAM Trading Services Inc. (BAMTrading) and the company’s chief, Changpeng Zhao, have been charged with 13 charges related to securities trading violations. “Based on thirteen indictments, we allege that Zhao and Binance engaged in an extensive network of fraud, conflicts of interest, non-disclosure and willful evasion,” said SEC Chairman Gary Gensler.

The SEC filed suit against Coinbase as well. According to the regulator, the platform operated as an unregistered broker. Since 2019, Coinbase has “earned billions of dollars by illegally facilitating the buying and selling of crypto-assets,” but has not registered as an exchange, the report said.

The fact that the SEC is filing lawsuits against crypto-exchanges means that the commission recognizes bitcoins as securities. From the SEC’s court documents to Binance, it appears that the commission has recognized the BNB token as well as the BUSD stablecoin as securities. BNB is the cryptocurrency that powers the Binance Chain ecosystem and one of the most popular utility tokens in the world. BUSD is a stablecoin pegged 1:1 to the dollar.

In an official statement, the SEC alleged that Binance operated unregistered exchanges, misrepresented control and oversight information on Binance.US (a separate US branch of the exchange), and engaged in unregistered sales of securities.

Zhao and Binance have publicly stated that US customers are prohibited from transacting on Binance.com. However, according to the SEC, Zhao and Binance secretly allowed major US clients to trade on the exchange.

According to the regulator, Zhao and Binance deliberately broke the rules and put their customers and investors at risk in an attempt to maximize their own profits. The SEC estimates that Binance.com and Binance.US have generated at least $11.6 billion in transaction fees since July 2017. The SEC also accuses Binance of not having an exchange license to trade securities.

According to analysts, the net outflow of user assets from Binance in just an hour after word that the US regulator was suing it was about $1.4 billion, or 2.2% of the exchange’s total reserves of $62.5 billion. Zhao, for his part, said the exchange was continuing to operate as usual and would make an official statement after looking into the case.

News of the SEC’s lawsuit against Coinbase sent shares of parent company Coinbase Global Inc down $9.37, or 16.2%, to $49.33.

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